The Executive Board of the International Monetary Fund (IMF) today approved
a new three-year arrangement for Togo under the Extended Credit Facility
(ECF) for SDR176.16 million (120 percent of quota or about US$241.5million)
to support the country’s economic and financial reforms.
[1]
The Executive Board’s decision enables an immediate disbursement of
SDR25.17 million (about US$34.5 million). The remaining amount will be
phased over the duration of the program, subject to semi-annual reviews.
The authorities’ ECF-supported program aims to reinforce macroeconomic
stability and to promote sustainable and inclusive growth. It aims to
reduce the overall fiscal deficit substantially upfront to ensure long-term
debt and external sustainability; refocus policies on sustainable and
inclusive growth through targeted social spending and infrastructure
spending that is financially sustainable; and resolve the existing
financial sector weaknesses, especially in the two public banks.
During the same meeting, the Board also concluded the 2016 Article IV
consultation. A separate press release will be issued shortly.
Following the Executive Board discussion on Togo, Deputy Managing Director
Mr. Tao Zhang, and Acting Chair, said:
“Togo’s economy has shown solid performance in recent years, with sustained
growth and low inflation. The country’s growth performance has been
underpinned by high levels of public investment to address significant
infrastructure gaps. However, this capital spending has also increased
public debt and debt service pressures, crowding out needed social
expenditures. At the same time, lingering deficiencies in the financial
sector have remained unresolved.
“The new arrangement under the ECF will support the authorities’ efforts
towards fiscal consolidation while maintaining space for pro-poor spending.
Public financial and debt management will be strengthened and revenue
administration bolstered. The two under-capitalized public banks will be
consolidated into one healthy institution. Regulation and supervision
standards in the microfinance sector will be strengthened.
“The medium-term economic outlook is favorable, with private sector
activity benefiting from stronger infrastructure and an improved business
climate. However, further progress will hinge on the authorities’
successful implementation of their ambitious macroeconomic program, as well
as pursuing broader structural reforms to improve public financial
management and address social needs.”
Annex
Recent Economic Developments
The economy has expanded at a healthy rate in recent years. Growth was 5.2
percent in 2014-16 buoyed by infrastructure investments and strong
agricultural production. Inflation was well contained, thanks to lower
food, energy, and transport prices. Togo’s poverty rate declined to 55.1
percent in 2015 from 61.7 percent in 2006, though it remains geographically
concentrated.
The fast pace of public investment has contributed to a pronounced increase
in public debt and the current account deficit. Public debt, including
prefinancing debt, domestic arrears, and public enterprise debt, increased
from 48.6 percent of GDP in 2011 to 80.8 percent in 2016 (76.2 percent
excluding public enterprise debt), reflecting public infrastructure
investments financed by both domestic and external borrowing. The current
account deficit remained high, reaching 9.8 percent of GDP in 2016, largely
due to investment-related imports.
Economic growth is expected to increase gradually in the medium term as the
fiscal stance is put on a sustainable path. Growth is expected to pick up
from 5 percent in 2016 to 5.6 by 2021, with the economy reaping the
benefits of an improved transportation network and productivity gains in
the agricultural sector. The private sector is expected to play an
increasing role as the engine of growth, as public investment returns to
its long-term sustainable level. Downside risks to growth include capacity
constraints in implementation of structural reforms, resistance to reforms
from interest groups, and further slowdown in Togo’s main regional trading
partners. With the improvement in the fiscal stance, public debt is
expected to be reduced to 73 percent by 2019 from a projected peak of 81.3
percent of GDP in 2017.
Program Summary
The government has committed to strengthen the fiscal balance and improve
public financial management and debt management, while addressing social
needs. Fiscal policies will aim to increase revenue, reduce
domestically-financed capital spending, and redistribute recurrent spending
allocations to target key social needs. The Ministry of Finance will be
reorganized
and public investments will follow established procurement and budgetary
processes. Tax administration will be bolstered by the broadening of the
tax base and better monitoring of exemptions. Customs practices will be
further modernized and automated.
The Togolese authorities plan to address persistent problems facing two
large public banks. The two under-capitalized banks are expected to be
legally resolved by the end of the first year of the program, with a single
well-capitalized public bank in its place.
Background
Togo, which became a member of the IMF on August 1, 1962, has an IMF quota
of SDR 146.80 million.
For additional information on the IMF and Togo, see:
http://www.imf.org/external/country/TGO/index.htm
[1]
The ECF is a lending arrangement that provides sustained program
engagement over the medium to long term in case of protracted
balance of payments problems.
